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Category > Business & Finance Posted 20 May 2017 My Price 8.00

Your broker is offering you two bonds

Your broker is offering you two bonds issued by two U.S. companies. One bond has an AA credit rating and the other has a BB rating from Standard and Poor's. Both bonds have a par value of $ 1.000, a coupon rate of 10%, and a maturity of 10 years. The required rate of return by investors is 8% for AA-rated bonds and 12% for BB-rated bonds. Please answer the following questions. 1) Explain the purpose of credit ratings. 2) Explain why the required rate of return is higher for BB-rated bonds than for AA-rated bonds.

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Status NEW Posted 20 May 2017 06:05 PM My Price 8.00

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